The Moral Hazard of Big Governments

by John Loudon

If you tried to buy a homeowners’ insurance policy for much more than the actual value of your home, no one would sell it to you.  The reason is that having such a policy would enable one to prosper financially were the home somehow to be destroyed.  This creates for you, what is called a “moral hazard“.   You have a significant financial incentive to do something wrong.  It is anathema for the insurance industry designed to protect against risk to enable such a risk.

So what if you were a government bureaucrat in possession of the power to help a business to prosper financially by doing something wrong?  Imagine if you had the power to wave your pen and deliver one million new clients to a purveyor of a particular product.  Some might say you have a moral hazard.   Just as insurance companies have a duty not to create that risk, so do those in charge of taxpayer funds.

Flu_Vaccine

In New York, some public employees concerned about side effects, and their civil liberties, are protesting because Dr. Richard Daines, New York State health commissioner has mandated that they receive the h1n1 vaccines or be fired.   Did the Governor order this?  No, an unelected bureaucrat essentially placed the order with the vaccine manufacturers.

In Missouri, prior to 2002, all mandated vaccines were voted into law by Legislators.  In that year, the appointed Director of the Department of Health added to the list of mandated vaccines, a compound against Chicken Pox.  With one stroke of the pen, a single bureaucrat created a demand for fresh orders for hundreds of thousands of doses of the vaccine, annually.  One can speculate about the profit in those orders.

In Texas, Governor Perry, usually a solid conservative got loopy over the Gardasil fervor and mandated that girls in his State receive the controversial vaccine against a sexually transmitted disease.   Girls as young as nine years old now have the State forcing upon them conversations about promiscuity and sexually transmitted disease.

At least in the case of Perry, the moral hazard is mitigated somewhat, because voters have the recourse to oppose the elected office holder in his re-election or pursuit of higher office.  What if he is term-limited and has no other aspirations?  It is cliché’ to contemplate how many politicians take the revolving door into the lobbying or “consulting” industry.  In the case of the bureaucrats in New York and Missouri and no doubt in hundreds of other political entities, the only check against the moral hazard is a serious legal investigation.  Consider the moral hazard that was presented to Illinois Governor Rod Blagojevich.   The power to appoint a US Senator was a “valuable thing” indeed.  He stands accused of contemplating many options including personal enrichment.  Indeed, it is axiomatic that power corrupts and absolute power corrupts absolutely.  So why would we entrust a single bureaucrat or even a single Governor with such a moral hazard?  Moreover, one of the greatest culprits feeding the voracious appetite of government is the effect when one bureaucrat seizing power becomes the envy of his or her counterparts.   Even today, Health and Human Services Secretary Kathleen Sebelius urged Americans to get vaccinated declaring “we will push the vaccine out as quickly as we get it off the production lines.”  Note the choice to use a personal pronoun.  Is she an employee?

As a correlative axiom cautions, “We do not get the government we want, we get the government we deserve”.  If we do not want to see our politicians and bureaucrats corrupted then it is up to us to ratchet their powers up or down according to common sense.   For the first 190 years of Missouri history, lawmakers, just as in virtually every other State, debated and enacted vaccine mandates based on science and the severity of the threats.  Now the Health Director has the power.  Logic would dictate that it is far more difficult to corrupt scores of politicians simultaneously than it would be to corrupt one bureaucrat.

Maybe the word “corruption” is too strong.  One can imagine that more than one health official has traveled to a conference at a warm clime at a nice hotel, with lots of corporate lobbyists hosting nice meals and displaying their latest products in the vendor spaces.  The discerning official who expresses skepticism will always be less popular.  The “go along Charlie” will continue to receive the best invitations.  Is that corruption?

A wise man once told me that anytime anything happens in politics, you can know that someone planned it that way.  Perhaps these moral hazards exist because there is an industry that profits from them.   If we wish to avoid moral hazards in our government then we need to recognize them when we see them and demand lawmakers take action.  More than a Governor or bureaucrat, the State Legislatures are the branch of government closest to the people.   When the question is as important as deciding which compounds will be forced into our bodies, that power ought to reside with the people over whom we have the greatest control; the Legislators.  Leaving such power with unelected bureaucrats creates a moral hazard. The act of undoing the risk belongs to us.


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Posted Oct 8th 2009 at 7:15 am in Healthcare, State Politics | 33 Comments